Certain Underwriting Members of Lloyds of London v. Insurance Company of the Americas

ICA insures workers compensation claims. The Underwriters provide ICA with reinsurance under treaties, which require that disputes be adjudicated by a three-member arbitration panel: one party-appointed arbitrator for each party, and the neutral umpire. Each party bears the expense of its own arbitrator and is permitted to engage in ex parte discussion with its party-appointed arbitrators during discovery. Underwriters declined ICA's request for coverage. ICA demanded arbitration and appointed Campos as its arbitrator. At the organizational meeting, each arbitrator was asked to disclose pre-existing or concurrent relationships with a party. Campos disclaimed any appreciable link to ICA. Before the conclusion of the arbitration, Campos let pass several opportunities for additional disclosures. The district court subsequently found that Campos’s relationships with ICA’s representatives were considerably more extensive than disclosed. The district court vacated the panel's award of damages under the Federal Arbitration Act, 9 U.S.C. 10(a)(2). The Second Circuit vacated, holding that a party seeking to vacate an award must sustain a higher burden to prove evident partiality on the part of an arbitrator who is appointed by a party and who is expected to espouse the perspective of the appointing party. The district court weighed the conduct of ICA’s party-appointed arbitrator under the standard governing neutral arbitrators. An undisclosed relationship between a party and its party-appointed arbitrator constitutes evident partiality, such that vacatur is appropriate, if the relationship violates the contractual requirement of disinterestedness or prejudicially affects the award. View "Certain Underwriting Members of Lloyds of London v. Insurance Company of the Americas" on Justia Law